How are expenses defined in the context of this budget system?

In the context of the budget system being discussed, expenses are defined as the sum of disbursements and increases in accounts payables. This comprehensive definition captures both the cash that has already been spent (disbursements) and obligations that the organization anticipates paying in the future (accounts payables). By including both components, this definition provides a full picture of the financial obligations of the organization, allowing for better financial planning and management.

Operational costs, fixed costs, and variable costs alone do not encompass the entirety of expenses. Operational costs focus specifically on the costs required for day-to-day functioning, while fixed and variable costs classify expenses based on how they behave in relation to production levels. However, these categories do not address the full scope of expenses, which encompass disbursements and liabilities, thus making the second option the most accurate representation of expenses in the budget context.